The Advantages of Leasing a Commercial Space
To purchase or lease, that is the question for many small businesses. Depending on your operating cash flow and tax structure, it may be more advantageous to lease your commercial space, which is why so many businesses do so. In fact, you might be surprised to learn that many large corporations lease as well, because owning property doesn’t always come with the benefits many think it does.
When you purchase space, you must put down a certain percentage of the financed loan and this down payment can be as much as 20 percent to 25 percent depending on your credit. Leasing property might require a deposit, but the amount comes in much less than a purchase down payment. If your cash flow is tight, the lesser option is better, as the deposit won’t hit you quite as hard.
Yes, you can depreciate property on your taxes but you can also take a tax deduction for your lease payments up to a maximum amount each year, and most businesses find that the tax deduction is better for their overall cash flow than the depreciation. The deduction reduces your taxable income, which means less money owed to Uncle Sam and your state and local tax authorities.
If you own your commercial space, you are responsible for all of its maintenance and repairs. If you lease the property, the property management company is. Do you know how much money you will save each year when you rent? Property maintenance is costly, especially if you require a lot of space. When something fails, such as the HVAC system, the hit to your bottom line can be exorbitant.
You may be just be starting out or have hit some snags in the past. Either way, your business credit score might not be what it should be to secure a loan. If this is the case, you will do better to rent, as it’s easier to be approved to rent than it is to own. Your lease payments help build your credit standing, too, so it doesn’t hurt you to lease instead of buy unless you default on them.
Finally, you have more options to lease than to buy. This is a huge market with a vast selection of properties from which to choose. If you have certain needs for your business, or if you have something definite in mind, you will find your options are greater when you seek out lease property. This helps you find the perfect space for your business, which is why so many lease their commercial space.